Digital currency: The Bitcoin goldmine

As Cypriots lose their savings in the latest crisis of the euro, the digital currency Bitcoin is enjoying spectacular success.

As Cypriots lose their savings in the latest crisis of the euro, the digital currency Bitcoin is enjoying spectacular success. Worth less than a dollar in 2011, its value has grown by more than 600% in 2013, with the price of a unit breaking $100 this week. As you read this it will be worth $150, and every indication suggests the rise will continue.

Bitcoin was launched by hackers in 2008 with the goal of becoming an incorruptible alternative to failing economies. “People say Cyprus was a one-off but it’s the shape of things to come,” says investment banker Mark Taylor. “If you need to keep your money safe – where it cannot be interfered with by government or banks, has complete transparency and no taxes – Bitcoin is perfect.”

Taylor is so convinced of the Bitcoin revolution that he is leaving his bank to be a full-time "miner." Using high-powered processors, miners verify the transactions between users and gain small rewards for it, with all transactions listed on an open-source, public server. On Taylor's iPad we watch updates as the global Bitcoin economy ticks over, listing transactions from $2 to $300,000.

Miners make $3,000 a day if their processor is fast enough, and that looks set to increase. Taylor expects the currency to approach $500 per unit by the end of 2013, and it is gaining mainstream acceptance – with WordPress and Western Union the latest big firms to take Bitcoin payments.

It is a transformation for the currency, which until recently was best known for its use on narcotic-selling websites. “It’s not only for hackers and criminals now – you do not have to be a subversive,” miner Geir Hansen of BitMinter told Metro. Bitcoin Magazine editor Mihai Alisie agrees: “Bitcoin is to banks what email was to post offices, a viable alternative without middlemen.”

However, a recent FBI warning that Bitcoin would "logically attract money launderers and other criminals" has raised fears of government regulation, which could destroy the concept. Further, cyber-criminals have succeeded in stealing small quantities. But despite such concerns, the Bitcoin value continues to march in the opposite direction to the financial markets.